Waterfield denied its latest plan, told to sell or merge

Federal regulators have told Waterfield Bank to merge with another institution or sell its assets after they concluded the Germantown bank could not devise an effective plan to boost capital from its negative levels.

In the enforcement order released last month, the Office of Thrift Supervision wrote that it notified Waterfield executives that the bank was "critically undercapitalized" and denied its latest capital plan.

Waterfield had $155.6 million in assets as of Dec. 31, a decline of 46 percent from a year ago, according to the Federal Deposit Insurance Corp. The bank showed a net loss of $17.8 million in 2009, more than triple its $5.7 million loss in 2008. Total risk-based capital ratio in December was negative 7.73 percent, down from positive 11.16 percent a year earlier.

A bank must maintain a total risk-based capital ratio of at least 10 percent to be considered well capitalized by regulators. From 8 percent to 10 percent is adequately capitalized, while less than 8 percent is undercapitalized, less than 6 percent is significantly undercapitalized and less than 2 percent is critically undercapitalized.

Executives with Waterfield, which was launched in 2000 as American Partners Bank, could not immediately be reached for comment.

Paul Joegriner, who was CEO of American Partners Bank before it was sold to Affinity Financial Corp. in 2008, said a merger or sale of Waterfield Bank was not impossible, but highly unlikely. "They have a business model that might not fit in with the traditional bank acquirer," said Joegriner, now a Bethesda banking consultant.

Several other Maryland banks are undercapitalized. Bay National Bank of Baltimore saw its total risk-based capital ratio decline to 6.14 percent in December from 8.21 percent in September and 9.57 percent in December 2008.

So far this year, 20 banks have failed across the country, up from 16 in the first two months of 2009, according to the FDIC. No Maryland banks have failed this year, but two failed last year: Bradford Bank in Baltimore and Suburban Federal Savings Bank in Crofton. Previously, a Maryland bank had not failed since 1992.